FTSE tracker

Another_Saver

Steve182 said:

Another_Saver said:

Steve182 said:

TBC15 said:

Another_Saver said:

TBC15 said:

The FTSE 100 is a Jurassic index, to be avoided at all costs.

Rather that than the S&P 500 full of dot com valuation consumer electronics and media companies, and healthcare companies that won't be around when the US inevitably switches to public healthcare.

So what's the relative performance over say 10yrs?

Last decade the difference has been massively in favour of S & P 500
This is to 2018. You will find something more recent if you persevere on Google I'm sure. The trend has continued in the same direction since then, but that's no indication of what will happen next...

For convenience let's use year end 2009 to year-end 2019. This is far too short a time period to infer anything from.

The S&P returned 13.3%, the FTSE 100 7.39%, hardly a bad run, just less good. All figures are annualised.
The gap is 5.50%
The FTSE's PE fell from 17.78 to 16.45, -.78% pa
The S&P's PE rose from 20.7 to 24.88 +1.86% pa
So 2.66% of the gap is explained by relative speculation or rerating, leaving 2.77% explained by additional earnings growth in the US. Both countries inflation rates and corporate profits/GDP ratios were comparable and during this period the US experienced a significant corporate tax cut. The 2000s had also been a worse decade for US earnings than the UK, so a reversion to the mean was to be expected.
I don't see a trend, I see volatility, opportunity and value.

I disagree,
I just think we're not doing so well here in the UK.
Over the pond they've created companies like Amazon, Apple, Facebook, Microsoft etc etc etc etc
In China Jack Ma had Alibaba and now has Ant, Richard Liu has JD.
Apple alone is worth the same as the whole FTSE100
OK we have AZN, GSK but nothing much of interest to invest in, just lots of dinosaurs in FTSE100
In the 250 and allshare it's a bit more interesting but we've created nothing scalable. 
A real shame, but that's just how it is.
We had the biggest navy in the world once, and the pound was worth >$4.
Is this all part of a cycle that's going to reverse in the coming years? I think not. The main investment opportunities are now elsewhere, and that may not necessarily be in the US.

Everyone has always said that since the Acts of Union. Declinist nostalgic moaning isn't new, it's our oldest tradition. And the things you bemoan were only possible because of the empire (also known as stealing other peoples' countries for your own economic advantage), it's a structural change not an economic one.
People were excited about rail right through the 1800s, then it was cars, aviation, radio, phones, the information age, anything with a .com in the name, and now a whole bunch of things all at once - tech, healthcare, consumer staples, cannabis, bitcoin, electric vehicles, renewables...

"Technological change does not

increase profits unless firms have lasting monopolies, a condition that rarely occurs...
As Warren Buffet (1999) and Jeremy Siegel (1999, 2000) have pointed out, in a competitive economy technological change largely benefits consumers through a higher standard of living, rather than benefiting the owners of capital." (doi:10.1016/j.pacfin.2005.07.001)

UK GDP and corporate earnings have been doing just fine compared with their US counterparts since the Millennium. America's main advantage at the moment is that not only is their own boomer generation flooding their economy with capital, ontop of incredible amounts of QE and fiscal stimulus, but they're also being flooded with cheap capital from the rest of the world. Temporarily that can create an illusion of higher growth, and I grant this situation is without a historical precedent I'm aware of, but it can't last. The UK's main problem pre-covid was why aren't we getting any real productivity growth or real median income growth since 2007? That is the main cause of real earnings growth in the long term.

Steve182

Another_Saver said:

Steve182 said:

Another_Saver said:

Steve182 said:

TBC15 said:

Another_Saver said:

TBC15 said:

The FTSE 100 is a Jurassic index, to be avoided at all costs.

Rather that than the S&P 500 full of dot com valuation consumer electronics and media companies, and healthcare companies that won't be around when the US inevitably switches to public healthcare.

So what's the relative performance over say 10yrs?

Last decade the difference has been massively in favour of S & P 500
This is to 2018. You will find something more recent if you persevere on Google I'm sure. The trend has continued in the same direction since then, but that's no indication of what will happen next...

For convenience let's use year end 2009 to year-end 2019. This is far too short a time period to infer anything from.

The S&P returned 13.3%, the FTSE 100 7.39%, hardly a bad run, just less good. All figures are annualised.
The gap is 5.50%
The FTSE's PE fell from 17.78 to 16.45, -.78% pa
The S&P's PE rose from 20.7 to 24.88 +1.86% pa
So 2.66% of the gap is explained by relative speculation or rerating, leaving 2.77% explained by additional earnings growth in the US. Both countries inflation rates and corporate profits/GDP ratios were comparable and during this period the US experienced a significant corporate tax cut. The 2000s had also been a worse decade for US earnings than the UK, so a reversion to the mean was to be expected.
I don't see a trend, I see volatility, opportunity and value.

I disagree,
I just think we're not doing so well here in the UK.
Over the pond they've created companies like Amazon, Apple, Facebook, Microsoft etc etc etc etc
In China Jack Ma had Alibaba and now has Ant, Richard Liu has JD.
Apple alone is worth the same as the whole FTSE100
OK we have AZN, GSK but nothing much of interest to invest in, just lots of dinosaurs in FTSE100
In the 250 and allshare it's a bit more interesting but we've created nothing scalable. 
A real shame, but that's just how it is.
We had the biggest navy in the world once, and the pound was worth >$4.
Is this all part of a cycle that's going to reverse in the coming years? I think not. The main investment opportunities are now elsewhere, and that may not necessarily be in the US.

Everyone has always said that since the Acts of Union. Declinist nostalgic moaning isn't new, it's our oldest tradition. And the things you bemoan were only possible because of the empire (also known as stealing other peoples' countries for your own economic advantage), it's a structural change not an economic one.
People were excited about rail right through the 1800s, then it was cars, aviation, radio, phones, the information age, anything with a .com in the name, and now a whole bunch of things all at once - tech, healthcare, consumer staples, cannabis, bitcoin, electric vehicles, renewables...

"Technological change does not

increase profits unless firms have lasting monopolies, a condition that rarely occurs...
As Warren Buffet (1999) and Jeremy Siegel (1999, 2000) have pointed out, in a competitive economy technological change largely benefits consumers through a higher standard of living, rather than benefiting the owners of capital." (doi:10.1016/j.pacfin.2005.07.001)

UK GDP and corporate earnings have been doing just fine compared with their US counterparts since the Millennium. America's main advantage at the moment is that not only is their own boomer generation flooding their economy with capital, ontop of incredible amounts of QE and fiscal stimulus, but they're also being flooded with cheap capital from the rest of the world. Temporarily that can create an illusion of higher growth, and I grant this situation is without a historical precedent I'm aware of, but it can't last. The UK's main problem pre-covid was why aren't we getting any real productive growth or real median income growth since 2007? That is the main cause of real earnings growth in the long term.

I agree with much of what you have said. I'm concerned about what's happening in the US and how long it can continue....

Sebo027

I think there is value in comparing long term data sets, for example, to demonstrate the effectiveness of an index tracker vs actively managed investment fund. However, I would have reservations about using it to compare the relative performance of two different stock markets all the way back to 1900 - the imperial powers have long since gone and the rise in the global economy and telecommunications surely tempers the value of the comparison. Furthermore, most of us would be doing exceptionally well to have invested over a 30-40 year period, so for practical purposes that seems a more reasonable timeline to play "what if." 

ProDave

Can anyone find a graph comparing the FTSE and S&P over time, taking into account the $ / £ exchange rate?  i.e. how it would actually have looked to a UK investor who has exchange rate to consider when buying and selling?

Linton

ProDave said:

Can anyone find a graph comparing the FTSE and S&P over time, taking into account the $ / £ exchange rate?  i.e. how it would actually have looked to a UK investor who has exchange rate to consider when buying and selling?

Trustnet/tools/charting and choose a suitable ETF which will also get you the values wuith dividends reinvested which is rather more important than the simple index.  However ETFs dont get you much before 2010.  You are limited in any case because the FTSE100 index was only started in the mid 1980's and the S&P500 around 1980.

Linton

IMHO the fundamental problem with the FTSE 100 as an investment is that it does not now represent British industry.  Many of the the most successful UK companies have been taken over by foreign companies. Most of the largest remaining companies in the FTSE100 are multinational companies that do most of their business overseas and are only listed on the LSE for historical reasons.

The net result is that the FTSE 100 has a sector allocation that is concentrated in the older more defensive industries and is accumulating third rate companies that only continue to exist because no foreign company wants to buy them.  Last time I looked something like 25% of the FTSE100 is in the range of market capitalisations covered by the MSCI Global Small Companies Index.

So ISTM using long term historical data in this area as a basis for choosing investments is highly suspect.  Now really is very different.

steampowered

Prism said:

I think the problem with 5 year investments isn't just the probability of a loss which is quite low. Its the added chance of almost zero returns, less than interest rate returns and less than inflation returns. Its just as important that people realise that after 5-10 years, although technically in the green they may well be disappointed with a very low gain especially if investing for the first time after hearing of 10 years of double digit gains.

I am not sure there is a graph  of historical probability of being disappointed

Very true. Though if you want almost zero returns or less than inflation returns - put your cash into a savings account. At least that way you know in advance that you are going to be disappointed!

MaxiRobriguez

Plenty of stocks in the FTSE100 which trade on low multiples, pay decent dividends that are secure and have global reach so as to avoid local geographical issues. They're not favoured at the moment and they're not sexy, but in the event of the racier US tech stocks suffering a sell-off, then they're the sort of stocks that keep your portfolio ticking along nicely.

Personally I feel inclusion of such stocks is important, so they make up a greater part of my portfolio (c 15-20%) than most, but critically that is not the FTSE index, it's a selection of about 8 stocks which I feel have greater security than the rest of the index.

I began trimming my US allocations late last year and started rotating into Japan/Europe and EM mainly. I reversed that briefly in March to pick up the NASDAQ after it got tonked but most of that has been rotated back again.

I think what I'm trying to say is, there's no one size fits all approach, each market has threats and opportunities. Just invest according to your goals and risk tolerance.

AnotherJoe

MaxiRobriguez said:

Plenty of stocks in the FTSE100 which trade on low multiples, pay decent dividends that are secure and have global reach so as to avoid local geographical issues. They're not favoured at the moment and they're not sexy, but in the event of the racier US tech stocks suffering a sell-off, then they're the sort of stocks that keep your portfolio ticking along nicely.

Personally I feel inclusion of such stocks is important, so they make up a greater part of my portfolio (c 15-20%) than most, but critically that is not the FTSE index, it's a selection of about 8 stocks which I feel have greater security than the rest of the index.

I began trimming my US allocations late last year and started rotating into Japan/Europe and EM mainly. I reversed that briefly in March to pick up the NASDAQ after it got tonked but most of that has been rotated back again.

I think what I'm trying to say is, there's no one size fits all approach, each market has threats and opportunities. Just invest according to your goals and risk tolerance.

Care to name those favoured 8 MR?

Alexland

Prism said:

I think the problem with 5 year investments isn't just the probability of a loss which is quite low. Its the added chance of almost zero returns, less than interest rate returns and less than inflation returns.

It's also worth remember that as a graph of a 100% equities investment that circa 10% probability of loss after 5 years could still be a substantial drop of circa 40% less than you invested at the time you might need to spend the money. Probably not as high as the normal 50%+ risk on equtiies due to some accumulated returns during the period.